DURECT Corp (DRRX) 2011 Q1 法說會逐字稿

Greetings.

Welcome to the DURECT first quarter earnings conference.

At this time, all participants are in a listen-only mode.

A brief question and answer session will follow the formal presentation.

(Operator Instructions) As a reminder, this conference is being recorded.

It is my pleasure to introduce your host, Matt Hogan, Chief Financial Officer for DURECT.

Thank you sir.

You may begin.

Good afternoon and welcome our first quarter earnings call.

This call will begin with a brief review of our financial results and then Jim Brown, our President and CEO, will provide an update on our business.

We will then open up the call for a Q&A session.

Before beginning, I would like to remind you of our Safe Harbor statement.

During the course of this call we may make forward-looking statements regarding DURECT's products in development, expected product benefits, our development plans, future clinical trials or projected financial results.

These forward-looking statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements.

Further information regarding these and other risks are included in our SEC filings, including our 10-K under the heading, risk factors.

Let me now turn briefly to our financials.

Total revenue grew to $8.6 million in the first quarter 2011 from $7.7 million in the first quarter of 2010.

Revenue from our R&D collaborations was $5.5 million in the first quarter or 2011 as compared with $3.8 million in the first quarter last year.

Revenue from this source always fluctuates from quarter to quarter depending on the state of development under the various programs and our role in those programs.

Product revenue was $3.1 million in the first quarter 2011as compared to $3.9 million in the first quarter of 2010.

Now, Q1 2010 included $961,000 in revenue that was related to excipient sales to King.

Product revenue from the sale of ALZET pumps and LACTEL polymers increased by about $202,000, or around 5%, from $2.9 million in the first quarter last year to $3.1 million in the first quarter this year.

Our gross margin on these products was around 55% in the first quarter.

These businesses continue to be strongly cash flow positive for us, and our LACTEL product line in particular is continuing the growth pattern it has shown over the last few years.

R&D expense was $9.9 million in the first quarter of 2011, as compared to $9.4 million in the first quarter of last year.

That increase was mostly due to increased clinical trial expenses.

SG&A expenses were $3.7 million in the first quarter this year as compared to $3.5 million in the first quarter of last year.

That increase was mostly due to higher patent expenses.

Our net loss for the first quarter, 2011, was $6.4 million, compared to net loss of $6.6 million for the same period last year.

And our net cash consumed during the first quarter was $7.7 million, which is on track with our budget.

At March 31, 2001, we had cash and investments of $41.9 million, compared with cash and investments of $49.6 million at the end of last year.

We have essentially no debt other than normal liabilities associated with running the business.

Thanks again for joining the call.

I will turn it over to Jim to discuss some non-financial matters.

Thank you, Matt, and hello everyone.

I would like to start with Remoxy.

Pfizer closed the King acquisition in February of this year.

Pfizer is a strong and extremely professional organization.

We couldn't ask for a stronger group to be moving Remoxy forward.

Interacting with the FDA, addressing REMS, and then marketing the product on a worldwide basis.

Pfizer is integrating King and our programs, and this process is off to a good start.

Pfizer made some comments regarding Remoxy on May 3, earlier this week.

Ian Read, their CEO, stated, and I will quote here - - The US PDUFA date for the Remoxy application is currently set for June 23, 2011.

At this time, we are working to address a specific issue in the manufacturing section of the application as well as to understand potential implications of the FDA's recent class-wide REMS announcement for extended-release opioids.

These issues could delay the timing of approval of the launch of Remoxy.

We can't shed much detailed light on the specific issue in the manufacturing section or the specifics involved in dealing with the REMS or other launch preparations by Pfizer, other than to say, we are encouraged that Pfizer also expressed confidence during the call regarding the need for these abuse-resistant products in the market and their commitment to the program.

Pfizer is well-suited to work their way through these issues, and we feel the product is in good hands.

I will briefly comment here on the REMS issue, which came out of an April 19 press release by the FDA.

We have encouraged people to read about the announcement and the associated Q&A.

We can send you a copy if you'd like.

Here are some of our take-home messages from this correspondence.

First, it's significant to recognize the FDA and the administration is again acknowledging the serious public health care issue involved with the abuse of opioids and is trying to find the right balance between curbing the misuse of these drugs without impairing access on the part of legitimate users who significantly benefit from them.

To put some perspective on this problem.

In 7 states, there are more people who die from prescription pain medication overdose than from motor vehicle related deaths.

There are 1 million emergency room visits every year for overdoses of these legal drugs, and this equal to the number of emergency room visits to overdoses from illicit substance abuse.

Almost one-third of the people who use illicit drugs start by using prescription drugs, and 7 of 10 of these people get their drugs first from the medicine cabinet.

In the near term, the FDA wants the industry group to come up with unified educational materials for prescribers and patients within 120 days.

The Opioid Grants Education Program will not include a mandatory requirement linked to the ability of healthcare prescribers to prescribe opioids at this time.

In the longer term, the administration stated that it intends to pursue legislation to that would require prescriber education as a continuation of obtaining DNA, -- excuse me, as a condition of obtaining DEA registration.

In other words, for physicians to continue to prescribe opioids, they would have to go through this process.

We are confident that Pfizer is well-positioned to navigate through this issue and it is again, an acknowledgment of the seriousness of the abuse problem, for which Remoxy is specifically designed to address.

Let's go through a few of the benefits of Remoxy.

First, it's a true, twice a day, oxycodone formulation in a gel cap.

It is designed to resist the most common methods of tampering and misuse, such as through snorting, smoking, injecting, and mixing in common drinks to get a rapid burst of drug.

A likeability study was recently published in Pain Medicine.

This supplements other in vitro studies that have been submitted to the FDA that demonstrate the tamper-resistant properties of Remoxy under various conditions.

A paper describing some of these features was published in the Journal of Applied Research in 2010.

A copy of this article can be found on our website.

All of this speaks to the potential advantages of Remoxy and the potential for this product, should it be approved, to aid in the fight against the abuse of prescription pain medications.

To just clarify our role with regard to this product.

We developed and licensed the drug delivery technology and dosage form that is Remoxy, which is based on ORADUR technology.

DURECT is, in fact, the intel inside.

We own and control all the patents for this product.

We work directly with Pfizer with regard to support for Remoxy.

We will receive a royalty on Pfizer sales that start at 6% and go up to 11.5%.

We also have a long-term supply agreement in place with King, now Pfizer, whereby we supply 2 of the key encipients in Remoxy to Pfizer on a cost plus basis.

We look forward to meeting with Pfizer in the near term with respect to three other ORADUR opioid best products, one of which we will work on directly with Pfizer without having PTI as the middleman.

(Technical difficulties) Extended-release oxycodone products clearly benefit a large number of chronic pain patients.

As sales of these products in 2010 exceeded $3 billion in the United States and $3.7 billion on a worldwide basis.

We look forward to getting the product on the market place, to providing another alternative to the large population of chronic pain sufferers while potentially helping the public health care problem faced by the misuse of this class of drugs.

And now I would like to move on and update on POSIDUR.

POSIDUR is our Phase III product in development for the treatment of post-operative pain for three days.

We completed two Phase II trials; one in hernia and one in shoulder that have demonstrated a significantly significant reduction in pain scores and opiate use for three days after surgery.

Based on our latest enrollment pace, over the last few months, we expect to finish our BESST Phase III trial enrollment in the third quarter, with top line data in the fourth quarter.

Also based on a pool and blinded analysis of the variability of data within BESST, we are not increasing the size of the study.

I'd like to go back now over some Phase II shoulder data that we reported on in February, as we think there might be some confusion over this data.

The was a study that was conducted by Nycomed in Europe.

We believe this was overall a positive study and particularly useful for our US program.

Given that this Phase II study had a relatively small number of patients per group, we were pleased to have a statistically significant signal seen when we compared the POSIDUR effect versus the placebo group.

If we look at positive versus the placebo group, we saw a statistically significant reduction in pain scores over the first three days after surgery.

We also saw what Nycomed described as a clear, clinically relevant trend in opioid sparing over the three days, and this signal was also statistically significant as demonstrated by the pre-specified sensitivity analysis.

In addition, the safety profile was clean, which adds to our safety database that will be a key part of the NDA submission.

From a European perspective, we did not see a statistically significant signal over the entire three-day period between POSIDUR and the active comparative group.

This could in part have been due to the relatively small size of the patient groups in the study, as well as study design and conduct.

A comparison against some form of standard of care is important and a very important aspect was required.

European-- for the application process and approval and pricing purposes.

Nycomed feels they the need to find another surgical model that they will be confident in that will show a statistically significant signal against an active comparator.

We have three abdominal surgical models incorporated into our BESST Phase III trial.

Two of which have active comparator arms, hence, the BESST data is going to be -- are going to be important for Nycomed to make decisions as to what to do with this program in Europe.

POSIDUR has the potential to change the post-surgical pain management arena with two partnerships in place.

Hospira in the United Stated and Nycomed in Europe with strong economics for DURECT.

Now I will move on to ELADUR.

We originally developed ELADUR for post-herpatic neuralgia, a neuropathic pain condition that is at the surface of the skin, and in fact this is the application and the approval basis for Lidoderm.

We have nice efficacy signal in our first Phase II-a study in post-herpatic neuralgia, a 60-patient study.

We also received an orphan drug status for post-herpatic neuralgia for ELADUR.

This earlier work was the basis for our getting a deal done with Alpharma.

The plan with Alpharma was to drive forward with PHN and then maybe later, or in parallel, do some exploratory work in other indications like chronic lower back pain.

King bought Alpharma and after program review, King decided to undertake a Phase II-b study in chronic lower back pain without doing any preliminary Phase II-a studies to for this indication.

We were concerned in advancing the data that no statistical significance would be seen.

There are two challenges with a chronic lower back pain study for this product.

First, is the relatively large placebo effect.

You have got a large placebo effect in any pain study, unfortunately.

And then when you are wearing a patch, it goes up exponentially.

In fact, wearing our large -- this patch over the small of your back is-- I equate it to like having the hand of your mother on the small of your back, reminding you constantly have got some therapy ongoing.

And even more significantly, in the chronic lower back pain opportunity is that chronic lower back pain is disease with a diverse ideology, and one from which the patient's pain originates from a variety of sources.

A number of which may not be associated with nerves near the surface of the skin.

In contrast, PHN stems from inflamed nerves near the skin's surface.

It is a very homogeneous disease, and a disease in which ELADUR has demonstrated a very nice signal in a Phase II-a study.

We are currently finishing the data analysis from this trial.

We and Pfizer will be reviewing the program and will work together to assess the next steps.

A quick reminder of what we like about this product.

First topic.

Three days versus 12 hours, which is not only a matter convenience, but may also lead to less breakthrough pain.

Two out of three Lidoderm patients complain of breakthrough pain during the 12 hours when they aren't able to wear the patch.

ELADUR is a much more patient-friendly design.

It's got better wearability.

It's a thinner, lighter patch, in fact, 25% of the weight of the Lidoderm patch.

One can shower and exercise with it, and it doesn't dry out like Lidoderm term.

The safety profile is at the low end of the risk spectrum, with very little bupivacaine is systematically absorbed from this patch.

We've got the orphan drug advantages.

No filing fee, six months of review, and also seven years of data exclusivity.

We have got the potential to be a best-in-class patch going into a large market, as demonstrated Lidoderm's $780 million in sales last year.

For the other programs we will give a brief update.

For the Sufentanil patch, not much profoundly new we want to convey this quarter.

We have continued to refine or development plans and are talking to potential partners for.

For the ORADUR ADHD we are about to start another Phase I study with multiple formulations, which we have developed based on what we have learned from our first Phase I trial from this program.

In conclusion, I'd like you to take a moment and let's compare what DURECT looks like today as compared to one year ago at this very same time.

We have two new major partners in place.

Five programs with Pfizer on a worldwide basis and Hospira for POSIDUR in the Us.

Remoxy has been resubmitted and now Pfizer is on the case.

POSIDUR Phase III data is coming soon -- we are approaching completion of enrollment with data later on this year.

We have additional clinical data generated for POSIDUR, ELADUR and the ORADUR ADHD, with new formulations of the new ORADUR ADHD program being tested shortly.

We'd like to thank you for you time, and now we'd like to take any questions you might have.

Thank you.

We will now be conducting the question-and-answer session.

(Operator Instructions)

The first question is from David Amsellem.

Caller, please proceed with your question.

Thanks.

Just a couple.

So on REMOXY.

I know you can't say much, but is there any sense of how long you think this manufacturing issue will take to play out, and how long you think it might delay the approval and launch.

I have heard some chatter roughly around the six-month time frame, but I wanted to get your thoughts.

You know what?

Unfortunately, we really can't say much with regard to any of those things.

We're actually, as you know, involved in the some of the technical details of the program, but we don't have the full picture.

DURECT isn't involved with the FDA interactions, Pfizer is.

And since Pfizer has control of the process, we really do need to allow them to be the ones that dictate and control the information flow.

This is just a broader question.

The OxyContin landscape.

What are you hearing in the field regarding perceptions of the new oxy formulation?

Just hearing anecdotal evidence that GI tolerability in the new version might be more problematic than the older version.

Any thoughts here as to what you may be hearing out in the field?

I'll let, Joe's close to that, so I'll let him speak to that.

Yes.

Hi.

This is Joe Stauffer, Chief Medical Officer.

I have had some experience with hearing some of the same things you're hearing as well, related to either patients not liking the drug or having some GI tolerability.

It's hard to really quantify any of that information, because a lot that is patients either complaining on the Internet, or sometimes complaining to their physician.

I do know that the new OxyContin is bioequivalent to the old OxyContin, so from the standpoint of drugs being released it is the same thing.

So I think anything that you would -- I would suspect that any complaints that might be happening now aren't really related to the release of oxycodone, but are related to changes in the formulation itself.

So, it still should work as well, but when patients change -- when chronic pain patients are changed into their medication, sometimes they just don't like it, and sometimes they have an interpretation that that change is what is causing their problem.

Hard to know.

I do know there is a Dear Doctor letter that came out, I can't remember how long ago, that might have been alluding to some of these things as well.

Thank you.

Our next question is from Jim Malloy.

Caller, please proceed with your question.

Hi, guys.

Thanks for taking my question.

I know that Pfizer is a bit hands off, or you're a little distant from Pfizer on what is going on with the FDA.

But with your experience, is this something that you have seen before, any light you can shed a what might be the issues with the manufacturing portion, or what could reasonably we assume to be the issues?

Unfortunately, we cannot shed any additional light.

And I think it should be noted that they said there could be a delay, not that there was a delay.

I think that is important to note as well.

All that being said, I think we will just have to wait and see.

Duly noted.

Is there any thought on having submitted NDAs yourselves.

In the manufacturing portion, any there particular areas that tend to get hung up more readily than others?

The devil is in the details.

Every NDA is its own, right?

Excellent.

And Joe, good to hear your voice.

I was wondering if you could call a little bit about the new REMS and your thoughts.

Will this be any real impediment?

Or your thoughts on implementation of the new REMS.

Pfizer mentioned that as a potential delay as well.

I read that as well, and I don't think it is a major impediment at all.

I think for all the C2, long-acting opioids, everybody pretty much has to follow the same script.

As you know, I was heavily involved in writing the REMS for Embeda.

I fully anticipate that the REMS for REMOXY will be very similar to that.

Pfizer has that template to work with.

I think the only new change is that the agency asked for an updated, in 120 days, an industry-wide agreement on the REMS.

That part I think is a little stickier, and because you have to get all the pharmaceutical companies to agree.

Sometimes that can be problematic.

Of course when you're expecting a PDUFA date.

And I cannot speak for Pfizer but maybe that is what they alluded to when they talked about that change.

Again, I think it is totally manageable and it is just one of the other things we have to deal with.

Excellent, I would agree.

Then maybe any thoughts, we talked about this on the last call as well, but with the July 28 PDUFA for Exparel?

And in the nearer term, do you have any thoughts on what you might expect to see next week at the APS in Texas?

I will be at the APS in Texas.

I think there is going to be some great information there.

I believe, in fact, I know for a fact, that the abuse liability paper that King did with REMOXY versus OxyContin, that's going to be presented there.

It's a pretty impressive paper.

Lynn Webster, who is the lead investigator on that paper, I don't know if he is going to be presenting it, but I am looking forward to seeing that.

As you guys know, Lynn conducted one of our abuse liability trials for Embeda.

It was the intravenous abuse liability trial.

He is a well-respected investigator in this field.

That data is very important, and I think the data is actually quite impressive with REMOXY versus OxyContin.

There are some other nuances in the trial too, above and beyond just taking the drug.

Crushing it and looking at the abuse liability profile in the drug liking it.

It had some statistical wins in the really, the major important factors that you would look at, drug liking, euphoria, drug good effects, these kinds of things.

Keep in mind, the initials is against the old OxyContin, but the new OxyContin is bioequivalent to the old OxyContin, and so we can't wait to see how that is going to come out.

I think he asked about Pacira.

I'm sorry.

You asked a question too, Jim, about Exparel and Pacira.

I'm not really sure if they are going to have anything there.

But of course if there is something there, I will be there to read all about it, but I haven't seen or paid too much attention to that one.

I guess maybe your thoughts -- I know that obviously it's another company's issue and not yours, but does it help or hurt to have another drug out there, sort of maybe being the pilgrim, taking the arrows?

Or does it hurt to have a competitor out there.

Would you think this drug even gets approved?

You mean for Exparel?

Yes.

Or you mean for REMOXY?

I always think it actually helps, especially if someone is out going first.

Sometimes they can take the bugs in the windshield before you do.

We certainly have to deal with those issues on opioids.

POSIDUR will be the same.

We're coming behind them.

It's actually good though for the FDA because they can kind of balance what they see in both clinical development plans to help them make their decision.

So I think good healthy competition is a good thing.

(Operator Instructions)

Our next question is from Jeffrey DeSeibert.

Caller, please proceed with your question.

Good afternoon.

A series of questions if you don't mind.

First, as far as REMOXY is concerned, and the specific reference to that single manufacturing issue, could you remind us, who is responsible for what, as far as the manufacturing of REMOXY?

Sure Jeffrey.

With regard to what DURECT.

What we do here, is we make the first -- obviously we develop and design the dosage form -- but we make the first clinical supplies.

But they are at a very small scale.

Thereafter we transfer that onto our partners, who have been many, as you know.

And they have been working with outside firms, contract firms, to actually produce the drug.

So at this point in time, after passing through the hands of two companies, Pfizer is now the one responsible, and they are working with the contractors and their own internal manufacturing people.

So to be certain that I understand.

What you are suggesting is, it wasn't necessarily the old King, in quotation marks, that was responsible for the manufacturing process of REMOXY.

They might have outsourced that a third party?

Well, actually the manufacturing process was already done fairly early on by the time that last Phase III trial was started.

That was already locked in.

So by the time -- I mean King was involved a little bit with that, and they certainly were involved with putting the response together, the NDA.

I don't know if that helps.

The point of my question is to try to understand where the problem might be.

Is this -- having noted Embeda had some stability-related issues.

The Embeda is a very different technology, so I wouldn't make any leaps of faith that because King had Embeda that there is some issue associated with that.

Embeda had two active agents joined together in compressed tablets, and all the rest of these kinds of things.

Very different circumstances.

Right.

I was just trying to understand whether this might be another King manufacturing issue, or whether the manufacturing issue is likely to have occurred outside of King's direct control.

I wouldn't be able to make any comments on any of those.

Unfortunately, it is more things that we can't comment on.

All right.

Now coming back to REMOXY.

We all noted that in January, Purdue Pharmaceuticals filed a citizen's petition again, requesting that, under the 505(b)(2), REMOXY be required, or the REMOXY application be required to cite OxyContin patents.

Can you comment on how confident you are about the strength of the 505(b)(2) path that was chosen?

Maybe I'll take a stab, I guess.

I would make a couple of quick comments.

Purdue filed a similar citizen's petition a few years earlier.

And this newer one is essentially that same thing kind of updated.

My understanding of citizen's petitions are they're the kind of thing the FDA is not really legally bound to do anything with.

They can take it into consideration, if they so choose, but it's not like it's legally binding on them.

It is interesting that the FDA, had it really been concerned, they didn't even need to accept the resubmission by, at that point, King, in December, if that particular issue had bothered them, they could have flagged it then.

So none of these things are dispositive.

They are just other background information on it.

And then it will be up to the Pfizer legal group to deal with as well or to weigh in and influence.

I don't know if you want to add anything.

Matt is pointing at me on if I want to add anything, and I would simply say, there is always going to be patents with every company.

Everyone is proud of their patents and tries to defend their patents, and we are going to do the same, and I'm sure Pfizer will do the same as well.

We certainly dealt with some of these issues when I was at Alpharma with Embeda, with Purdue and that drug launched.

It's off the market now for other reasons, but these things I think are manageable between companies.

And so at the end of the day, the more important thing is that drugs get to market that help a public health problem.

The public health problem is not going away.

The agency knows it, and the agency is doing everything that they can do to bring other products to market.

Just having one out there, a long acting oxycodone, is not necessarily a good thing, as I said before.

I think good healthy competition is a good thing, and I also believe that with the long-acting opioids, too.

Thank you.

Well, since Joe is on the call and sharing some opinions with us, I'd like to circle around to POSIDUR and ask you gentlemen to explain a little bit more of the statement made about, at this point, based on pooled, blinded data, you do not anticipate expanding that pivotal Phase III, I'm sorry -- pivotal third cohort, right?

Talks us through a little bit more what you really mean by that.

Sure.

So whenever you are doing this kind of trials, any kind of trial, you've got multiple sites, multiple surgeons, and of course you are always being concerned about variability among surgical technique.

And the way that the data might be collected.

And so what we did when we designed this trial, we designed and built-in, and got FDA agreement to allow us to take a look at the data in a blinded way.

Just to make sure that the variability within that cohort was not too wide and too broad.

Because if the variability is too big, then you have a concern that you might need to increase your sample size in order to get your P value and to get statistical significance.

The good news for us is that we did that blinded look, and we hit the appropriate spot in cohort three.

It all looked just fine.

We actually were within the variability parameters that we had predicted.

And that tells us -- it's even more than we think we don't need to increase the sample size.

We're not going to increase the sample size and that is all good news.

And again, that is all pre-specified, and just to be clear, this is one of the things where you don't have to, what we call, take a P value hit.

In other words, you are actually opening up the database to look at the efficacy.

We did not do that, because if you do that then take some statistical penalties.

Again we're just looking at variability and how the data is collected, and it all looks good, which means that we don't need to increase the sample size, and we won't.

Just to clarify.

We don't have any hint of efficacy or not efficacy.

This is just variability of the data.

Correct.

Right.

So your data could be consistent in saying that you are not statistically significant, or it could be consistent in saying that you are statistically significant.

We don't know which of the two, we just know that there is a certain consistency to the data.

That is correct.

Consistency to the variability of the data.

If the variability is very large, then oftentimes you need to increase sample size in order to still drive to the P value that you're looking for, which is less than .05.

In our case, our variability is within the confines of we predicted, which is good.

Which means that even though we don't know if we are have a positive trial or not, we believe that we have got enough patients in those cohorts that we do not need increase sample size.

All right.

Well, and let me come back to the $64,000 question gentlemen.

How good do you feel about what is going on with the BESST trial, and how confident do you feel that you will get your statistically significant data?

I'll have to get my crystal ball for that one, Jeffrey.

These trials are always tricky, and I never like to comment on how I feel today.

I personally feel very good, but the data will be what it will be.

Pain trials are hard, as Jim said earlier, even in trials like this, because patients are making their own assessments about how they feel, and there are lots of things that go into how a patient feels that a post-operative surgical incision.

I'm feeling very good about the quality of the data.

I'm feeling very good about the variability of the data.

I can tell you that, outside of a P value, we'll have to wait until the end of the year when we unblind the trial.

All right.

And so my final question on POSIDUR comes to timing of information.

You had originally set the goal of coming back to us in the first half of this year.

It looks like you've missed that goal.

You're pushing completion of the trial into the third quarter and data being available in the fourth quarter.

How confident are you based on, you've now had about 18 months of track record working with various centers.

How confident are you that you're going to meet this new, revised and extended deadline?

Yes.

I am actually on this one very confident.

I will tell you the enrollment delay.

That one is on me, that is my accountability.

And last quarter we looked at the enrollment rate and plans to open additional sites and felt like there was no need to change our target date.

But as we have gotten closer it looks less likely that we will complete enrollment by the end of June.

We have not missed it yet, Jeffrey, but, as I said, it looks less likely.

So there's nothing seriously wrong, it is just a modest change to our expectation for when we will finish enrollment, and we still expect top line data the end of this year.

And a lot of the reason why it doesn't change our top line data point is because of what I alluded to earlier.

The data, so far, appears to be clean.

The database is tight.

It's electronic capture.

All of the money and time to spend up front making that happen helps -- protects us on the back end if we have these slippages in enrollment.

So it does not change the overall picture by the end of the year.

Thank you very much.

I have got a couple of more questions, but I'll go back into the queue in case there are others who are waiting to ask questions.

(Operator Instructions)

Our next question is a follow-up from Jeffrey DeSeibert.

Caller, please proceed with your question.

All right, gentleman.

Well, thank you again.

Jim, in the previous quarter, you were telling us you were feeling pretty good about the progress you're making on biologics, and we see no mention in either the press release or your comments today.

How should we interpret that comparative silence?

I would not interpret it as anything.

It's just simple we felt there were larger issues to talk about, one being the REMOXY piece and one being the POSIDUR piece.

We are still moving along nicely with regard to our feasibility program, and I don't know if, Felix, you want to make a comment on that?

At this point in time we are building our patent position in this area.

We are getting out a number of feasibility projects with several partners.

And our expectation is that we will have substantial business in the future in the biobetters field.

And I think it is a very important area where everybody is looking for new products.

So I think we will be very well positioned with our capability internally, including our manufacturing capability in Birmingham, where we synthesize our own specialty polymers.

So I think, certainly, it's part of our future.

And just to note.

We are very grateful and thankful that with regard to all the horrible weather problems they had down in the Birmingham area, our facilities were spared and our people were spared.

Thank you.

Your previous comment had been that you were feeling good about being able to tell us about a first tangible transaction this year, do still feel confident about that?

I don't think we have ever limited it to this year.

The nature of -- you're right the next real benchmark for an outsider is probably if we can take one of these feasibility projects and advance it into a real development deal with another company that we can announce.

That is an unambiguously true.

On the other hand, that is impossible for us to handicap a timetable for.

They happen when they happen, and some of that has to do with the feasibility of work that we do, and some of it may have to do with this agent that the other company has and their program that we have nothing to with.

And some of it then is going to be the business part of it, too.

I think that we feel good about the feasibility projects we have underway.

We've signed some new ones.

But trying to put a specific timetable on one of those matures into a real deal, that is not something we can do.

It's really tough, Jeffrey.

That is why we don't talk about them, because they are earlier research programs.

So we, as Matt alluded to, we can have everything work exactly right, get the durations we are looking for, and the release rates.

And then the company decides for some reason, either the compound itself, its performance or some other issue, changes their strategy, and they don't want to work on that one now.

So it is always a possibility with the early stuff.

All right, well thank you.

I had carefully noted your comments on the previous call and I sensed you were kind of backing off from that.

That is not the intent.

It's purely, like, let's try to shorten what we write.

As opposed to any deemphasis.

That is right.

All right.

And Matt, a question for you.

Cash burn $7.7 million, kind of spiking up.

You multiply that by four, you get to $30 million.

It's not an immaterial rise in cash burn, can you share some thoughts with us going forward on what your plan is to perhaps push that down?

Maybe I speak too quickly, but I tried to make the point that that is actually on track with our budget for the year.

We knew the first part of the year burn rate was going to be higher.

First quarter we paid down some accrued liabilities, which would not be the kind of thing that happens in later quarters.

Our clinical expenses are the high point here while we are running the POSIDUR work, and we'd expect those to go down over time.

Especially the last part of the year.

So I don't actually think, I wouldn't interpret from that that there is any need for us to change our burn rate guidance for the year.

That is not the case.

So I don't know if that is helpful or not.

But I don't think it's correct to take $7.7 million and multiply by four.

It's just looking at cash coming down to $42 million, divided by $7.7 million and you kind of look at how many quarters of cash are left.

And with a potential material delay in the approval of REMOXY, one is left wondering, okay, what does that mean for the company?

Fair enough, but I guess I am sort of saying, don't necessarily take $7.7 million and divide the cash by that number.

It was as expected, high in the first quarter.

It will be a lower number in the second quarter.

All right.

Thank you very much, gentlemen.

That is it for my questions, and I appreciate your sharing so much information.

Unless you have other questions, we're all going to go back to work here.

But we are always available if anybody wants to call and ask clarifying questions.

We are happy to chat with you.

Thank you very much.

Ladies and gentleman, this concludes today's teleconference.

You may now disconnect your lines at this time, and thank you for your participation.